Sprint And SoftBank Obtain Approval For Business Merger
On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Mergers & Acquisitions on Friday, June 14, 2013.
Although both parties to a business deal may agree upon moving forward with a transaction, many times this is not enough to have the desired transaction completed. Each industry has some type of rules and regulations which must be followed. This was the case when foreign bank SoftBank attempted to purchase majority ownership in Sprint Nextel. Before being able to move forward with the business merger, the transaction needed approval from federal as well as California regulating authorities.
Initially, lawmakers were concerned that SoftBank's purchase of a majority stake in the large communications firm would constitute a potential national security risk. However, the merger proposal received approval from the Committee on Foreign Investment in the United States (CFIUS). The committee filed its decision with the U.S. Security and Exchange Commission (SEC) and stated that it did not find any national security concerns which had not been resolved in the details of the proposed merger.
In accordance with the CFIUS terms for approval, the two companies must obtain further approval from governmental regulating agencies for the appointment of a security director, who will serve on the board of Sprint. The regulating agencies will have the power to either approve or deny proposed operators of network equipment as well as service providers chosen by Sprint. Despite the CFIUS approval, the proposed merger must now obtain approval from FCC before being finalized.
In addition to the approval from some necessary federal government agencies, the proposed business merger was also recently approved by the California Public Utilities Commission. On the other hand, Sprint also has another counteroffer from Dish for $25.5 billion for a majority stake in the communications firm. Sprint obtained permission from SoftBank in order to be able to negotiate with Dish regarding the counteroffer which is significantly larger than SoftBank's offer. However, no matter which company ends up purchasing a majority stake in Sprint, it will be necessary for the newly merged business to ensure compliance with all applicable rules and regulations in making the transaction.
Source: infoworld.com, "Sprint-SoftBank merger gets U.S. security panel approval," Grant Gross, May 29, 2013